A home appraisal is one of the most important steps in buying a home, refinancing your current mortgage, or pursuing a reverse mortgage, and there are many different types of appraisals. Below we’ll walk you through everything you need to know.
Types of Appraisals: There are four types of appraisals with the most common being ordered by the lender as part of the mortgage process (whether it is buying a home or refinancing). Because lenders need to determine the value of the home before a mortgage can be approved, they will order one of these appraisals: tax appraisal, comparison analysis, drive by appraisal, and walk-through.
How Appraisal Value is Determined: Many factors can affect a home’s appraised value, such as location, views, upgrades and amenities to name a few; however, the most important factor is determining appraised value is the breakdown of comparables, or a comparison analysis. Comparables are nearby homes that have recently sold and are similar in size and features to the home being appraised.
Do Your Homework: Do some basic research before the appraiser comes knocking at your door and be prepared with relevant information that could affect the appraised value (such as a list of updates or upgrades).
Make a Good Impression: Take care of any small repairs you’ve been putting off before the appraiser arrives. Tidy up and clean your home.
Tax Value vs Fair Market Value: Tax value is what your home is listed as in the county’s or city’s property tax records and may undervalue your home as they only occur once a year and don’t take comparables into account.
Don’t ignore or underestimate the home appraisal process. Be involved and use the above information to approach the process with confidence.
For more information, visit the American Advisors Group.
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